DWCAP, I think your calculation is a little off. A $260k loan w/ 6.25% rate @ 30 year fixed should yield P&I of $1600/month. With 20% down, you’re looking at payment of $1280/month. As you said, a typical 3/2 will rent for around $1800/month.
I agree on the typical renters in this area, but I don’t agree on the 125X rent multiple. It does not take mortgage rate into consideration. One example is at the bottom of last cycle around 1997ish (which now looking back, put prices at undervalued), a typical rent for a 3/2 in MM run for about $1200/month. The price of such homes were around $160k-ish. But interest rates were around 9%. $160k @ 9% over 30 years would be around $1300/month mortgage. Today, such house would rent for around $1800/month. So to keep the rent vs monthly mortgage similar to the bottom of last cycle (which is 10% > rent), you’re looking at house price of around $320k, not $260k you suggested or even $200k if you use the 125X multiple.
Regarding lot size, I don’t think it’s that small when you take into consideration the size of the house. The typical lot is around 5000 sq-ft with houses around 1400 sq-ft. I’ve seen plenty of houses in CV, 4S, PQ, RB, etc, that have lot size around 5000-6000 sq-ft but squeezed houses 2-3X the size.
